India’s largest bank says it is already using new Reserve Bank of India guidelines to combat its ballooning batch of bad loan–and not a moment too soon.

State Bank of Indiaw its net profit fall by 34% last quarter as it had to set aside cash to cover potential bad loans from companies unable to handle slowing growth and rising interest rates. The bank’s bad loans rose more than 25% to nearly 678 billion rupees ($11.09 billion) or 5.73% of its total loans that quarter.

To keep its bad debt pool from deepening, SBI is working hard to move faster to identify and aid borrowers that are struggling and get rid of the ones that can’t be helped.

“Everybody realizes that public sector banks cannot afford to have these kinds of non-performing assets,” Soundara Kumar, the deputy managing director who is in-charge of handling assets under stress at SBI, told The Wall Street Journal.

Indeed the central bank has ordered lenders to become more proactive in dealing with their problem loans by April 1.

State Bank of India has told all its branches and employees to flag any irregularity in any account in order to meet new RBI requirements that banks have a system to recognize struggling companies.

Today, a few days of delay on a check payment or a letter of credit devolving are enough to ring alarm bells – not just in the branch but all the way back to SBI’s headquarters in Mumbai. In better times these kinds of minor problems would not have been noticed so early.

“Controlling slippage is very tough,” said Ms. Kumar. “If you are not alert for a day, it will slip.”

Ms. Kumar is heading one of the many new committees SBI has created to keep an eye out for struggling borrowers. Each week the committees meet to looks at around seven or eight borrowers that are having trouble.

The committees first try to identify the core problem by asking for example “Is this just a temporary bump in the road for the company or a chronic problem?”

The next step is to identify the source of the problem. For internal problems, the bank offers loan restructuring or asks the borrower to sell a part of its business to reduce the debt.

“We have to handhold a lot because the times are bad,” she said. “We can’t throw the baby out with the bath water.”

If it is an external problem—trouble with clients or suppliers for example—SBI isn’t shy about using its extensive connection in India to correct them. Even the bank’s chairwoman, Arundhati Bhattacharya, doesn’t hesitate to make a few phone calls to get one company to pay what it owes one of SBI’s borrowers.

For the borrowers that can’t be saved, SBI is getting more aggressive about giving up on their debt. The bank is planning to put nearly 30 billion rupees of bad loans for sale to asset reconstruction companies. That’s something it hasn’t done before.

To avoid the years the years in court it can take to recover bad loans, the bank is now holding “bank adalat” or “bank courts” to get borrowers to agree to an out-of-court settlement. The aim of the bank is to at least recover the principle.